The Supreme Court of India, in a detailed and emphatic judgment, has reaffirmed that an arbitration clause in an agreement does not take away the consumer’s statutory right to seek redressal under the Consumer Protection Act. The decision came while allowing an appeal filed by M/s Citicorp Finance (India) Ltd. against a ruling of the National Consumer Disputes Redressal Commission (NCDRC), which had earlier directed Citicorp to refund ₹13.2 lakh with interest to Mr. Snehasis Nanda, a flat owner based in Navi Mumbai.
The bench of Justice Ahsanuddin Amanullah and Justice Sudhanshu Dhulia delivered the judgment on March 20, 2025 in Civil Appeal No. 14157 of 2024, setting aside the NCDRC’s findings on several legal and factual grounds.
Background of the Dispute
Mr. Snehasis Nanda had purchased a flat in Navi Mumbai, which was under a housing loan from ICICI Bank. In 2008, one Mr. Mubarak Vahid Patel agreed to purchase this flat for ₹32 lakh. Mr. Patel, the buyer, entered into an Agreement for Sale with Mr. Nanda and applied for a home loan from Citicorp Finance, who sanctioned ₹23.40 lakh.
A portion of the loan (₹17.8 lakh) was paid by Citicorp directly to ICICI Bank to foreclose Mr. Nanda’s loan. The remaining ₹13.2 lakh was allegedly never paid to Mr. Nanda, leading to a dispute over the role of Citicorp and the existence of a Tripartite Agreement between the seller (Nanda), buyer (Patel), and lender (Citicorp).
In 2018, Mr. Nanda filed a consumer complaint before the NCDRC, which was initially dismissed. After Supreme Court intervention, the case was remanded to the NCDRC, which then ruled in Nanda’s favour. Citicorp challenged this ruling before the Supreme Court.
Key Legal Issues Before the Supreme Court
Whether Mr. Snehasis Nanda was a “consumer” under Section 2(1)(d) of the Consumer Protection Act, 1986?
Whether a Tripartite Agreement existed that bound Citicorp to pay the balance sale consideration?
Whether the complaint filed in 2018, nearly 10 years after the cause of action, was barred by limitation?
Whether the arbitration clause, allegedly contained in the Tripartite Agreement, would bar proceedings before the NCDRC?
Whether the borrower, Mr. Patel, was a necessary party whose absence rendered the complaint defective?
Court’s Findings and Observations
On Consumer Status and Privity of Contract:
“In the specific factual setting, the respondent, having no privity of contract with the appellant, cannot be termed a ‘consumer’ under the Act.” (para 17)
The Court held that since Mr. Nanda had no direct agreement or contractual relationship with Citicorp, he could not be classified as a “consumer”.
On Existence of Tripartite Agreement:
“Non-production of the (complete) Tripartite Agreement, if at all there was one, would lead to an adverse inference… against the complainant-respondent.” (para 16)
The Court noted that no signed or complete copy of the alleged Tripartite Agreement was ever produced by Mr. Nanda. What was submitted was an unsigned, unstamped, and partially blank document, insufficient to establish Citicorp’s liability.
On Limitation:
“Neither reasons nor a formal order condoning delay is forthcoming… despite the appellant raising the issue of limitation, the Impugned Order is silent on the said score.” (para 22)
The complaint was filed ten years after the alleged cause of action arose in 2008. The Court observed that the NCDRC had failed to record any justification for condoning such delay, violating Section 24-A of the Act.
On Non-Joinder of Borrower as Necessary Party:
“The borrower would be a necessary party… being the sole link between the respondent and the appellant.” (para 23)
The Supreme Court held that Mr. Patel, who had taken the loan and was the buyer of the flat, was vital to the adjudication of the dispute. His absence from the NCDRC proceedings was a fatal procedural defect.
Arbitration vs Consumer Forum — Court’s Core Holding
While the final outcome of the case went in Citicorp’s favour due to lack of privity and other technical grounds, the Court took the opportunity to clarify an important issue on arbitration clauses in consumer contracts.
Citing M. Hemalatha Devi v. B. Udayasri (2024), the Court reaffirmed:
“Consumer disputes are assigned by the legislature to public fora, as a measure of public policy… such disputes will fall in the category of non-arbitrable disputes, unless both parties willingly opt for arbitration.” (para 24)
“It is the consumer alone who has the option to elect arbitration, and not the service provider.” (para 24)
The Court distinguished arbitration proceedings as private forums that do not offer the same statutory remedies — including compensation and penalties — that are available under the Consumer Protection Act.
Final Decision
The Supreme Court allowed the appeal.
The NCDRC’s order was set aside in entirety.
The complaint was held not maintainable, and Mr. Nanda was not a ‘consumer’ under the Act.
No cost was awarded to either party.
The judgment clarified that it does not preclude Mr. Nanda from pursuing remedies against the borrower, if available in law.
“This Judgment shall not impact proceedings, if any, inter-se borrower and respondent.” (para 28)
